Starting a new business is exciting. You should always take advice as to areas you may not be familiar with especially if you are thinking about taking on a lease. All leases are complicated documents, potentially full of costly pitfalls, which an untrained eye may not pick up.
Please bear in mind that as it is the Landlord’s building, they are perfectly entitled to say no to many or all of the suggestions we suggest, even if it appears completely unreasonable to do so. In such circumstances, you need to weigh up the pros and cons of agreeing to the Landlord requirements or seeking alternative premises.
Here are a few things to consider.
Consider who will be the Tenant
You may want to start trading as a limited company or indeed a partnership. If so make sure that the lease reflects this.
Be aware that most commercial Landlords in Jersey will look for some form of third party protection to guarantee performance of obligations under the lease. This may be in the form of someone providing a guarantee or perhaps a deposit.
Jersey leases typically seek quarterly advance payments of rental. For a new start-up, you may wish to consider monthly payments to assist with cash flow. Also, make sure consideration is given to how the Landlord seeks to increase future rental. Check the proposed terms as to whether this is to be JRPI or in line with market or both.
You must always make sure that you are allowed to use the property for the use you intend. The Jersey Planning department strictly regulates the use of all buildings in Jersey. It is not uncommon to discover Tenants occupying property without appropriate use consent, which is an offence.
You need to consider service charges. This is a cost usually found in a commercial lease and allows the Landlord to recoup additional costs from you. In general terms, Jersey leases will contain such a clause. As such consideration should be given to limiting your exposure to these costs.
You should be careful to consider what responsibilities you have in relation to repairs and decoration. Never underestimate how much it may cost to maintaining and keeping your office space in good repair. It is always good practice to request a schedule of condition at the outset so you can use this as a benchmark.
You will need to consider what works are required. All leases will have considerations as to what you can and cannot do regarding works at the premises. Generally, Tenants will need permission to carry out works and this not only from the Landlord but also from Jersey planning and building control. This will include partitioning.
While stating the obvious you need to ensure that you have permission to carry out the works you plan (at least in principle) before you enter into the lease.
Rent Free Periods
If the property requires a fitting out, this can be time-consuming and may prevent you from using the space notwithstanding having taking on the lease. As such you should be considering asking the Landlord for a rent-free period. Otherwise, you will have a burden without any income.
Right to assign
You should always ensure you have a right to assign the lease. That way, you know that you won’t have to find a way of keeping up with rental payments until the end of the lease for a Property you would rather be without.
Tenant’s Break Clause
Always consider a break clause in the lease. It might be especially useful to have a right to break relatively early on like at the third anniversary of the lease, so that if the business really isn’t working out, at least you can get out of the lease with minimum fuss. However one should note that this may have an effect on rental levels, it will all depend upon negotiation.
There are numerous other issues to consider but this overview should give you an idea of some of the points to look out for. Please remember that legal advice at the outset could save you a lot of money and angst in the future.
How Parslows can help
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The information and opinion expressed in this briefing does not purport to be definitive or comprehensive and are not intended to provide professional advice. For specific advice, please contact Parslows, We are not responsible for, and do not accept any responsibility or liability in connection with, the content of this document or any reliance upon it